state rejects warnings on consumer bill  
11 September 2008

Warnings of the dire consequences for business if strict product liability were introduced have failed to convince the trade and industry department that such a measure should be left out of the Consumer Protection Bill.  The department reaffirmed its position on strict liability in Parliament yesterday, rejecting suggestions that it would add greatly to the cost of doing business, and therefore to prices.

It stressed that this form of consumer protection which would also apply to professions such as architects, engineers, doctors and lawyers was “long overdue” in SA.  Business argued that liability should be limited to when fault was proved, but the deputy director-general of consumer and corporate regulation, Zodwa Ntuli, said this would burden consumers with the onus of proof. She did not believe the costs of insuring against liability would be too onerous as business suggested.

Ntuli gave the department’s response to the numerous submissions made to the trade and industry committee during public hearings on the bill.  She said the department was open to the idea of product labelling of genetically modified organisms to give consumers choice. Committee members felt quite strongly that there should be such labelling. Ntuli said a requirement for such labelling was in the original draft of the bill but that the agriculture and health departments were opposed to it on the grounds of cost and technical complexity. She said the committee would have to make a decision on the matter.

The department was equally resistant to pleas by economic sectors such as financial services that they be exempted up front from the bill to prevent over-regulation. Ntuli said overarching and comprehensive consumer protection measures were needed.  The department was not in favour of up-front exemptions, preferring applications for exemption to be made after promulgation, as allowed for in the bill. Much criticism was directed by business at the inclusion of franchisees in the definition of consumer. Retailers such as Pick n Pay said this would undermine the entire franchise model of business. However, Ntuli was adamant that franchisees had to be protected as they were totally powerless regarding franchisors.

Franchise agreements had to be more flexible, she said, and franchisees given the choice as to where to purchase their goods on a competitive basis. The bill did not interfere with the quality standards required of franchisees.  The cooling-off provision would be amended to prevent abuse by consumers, who would not have the right to return goods that had been opened or tampered with. Department officials were also open to the suggestion that there be a “grey list” of contract clauses that would automatically be assumed to be unfair, in addition to the “black list” contained in the bill. However, they said the grey list should not be in the bill but be issued through regulations or directives over time.  Another significant amendment would change the threshold criteria for the application of the act from one based on transaction size to one based on turnover or asset value.

Linda Ensor, businessday.co.za